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The Libertarian Case for Corporate Social Responsibility

May 2, 2013 in Economics

By Joseph Salerno

The AEI, a centrist-establishment think tank, published a compelling policy study this week by Timothy P. Carney. The Case against Cronies: Libertarians Must Stand Up to Corporate Greed is a hard-hitting critique of crony capitalism that goes beyond merely recounting the ubiquitous and shameful instances of gigantic U.S corporations seeking and obtaining subsidies and monopoly privileges from Big Government at the expense of taxpayers, consumers and more efficient competitors. Indeed, Carney calls into question the conservative mantra as classically enunciated by Milton Friedman: ‘The social responsibility of business is to increase its profits.” Not so fast, Carney says. For what if investing in lobbying for a government subsidy or political barrier to entry is the best way for a corporation to increases its profits? Isn’t such behavior not only ethically dubious, but also inconsistent with the free market? While Carney does not formulate a libertarian standard of corporate responsibility to replace Friedman’s, he does make a powerful case that it should include explicit prohibitions against violating the principles of the free market. As Carney concludes:

Conservatives are good at criticizing the government for picking winners and losers — and they’re right to do so. Politicians and bureaucrats cannot allocate resources as efficiently as the market. The free market is the greatest welfare program ever invented.

But if the free market is worth protecting, conservatives must do a better job calling out corporations that participate in cronyism, as well. Doing so will raise tricky questions for conservatives. To what standard must we hold companies? What is ethically acceptable and what is not? . . .

When the ethanol industry writes an ethanol mandate, or H&R Block hatches a policy that crushes its small competitors, it’s legal. But it’s also a naked attempt to extract money from unwilling payers, restrict the freedom of competitors, and deny options to customers. This is the sort of behavior conservatives and libertarians need to denounce.

While Carney concedes that there is a grey area in practically judging corporate behavior in a mixed economy that raises some tough questions, he insists “these are questions free-market folks need to start discussing. . . . even if it means using the language of corporate social responsibility.”

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